Under absorption costing when production exceeds sales in a year:
A)Inventory values and cost of goods sold are higher than under variable costing.
B)Inventory values and cost of goods sold are lower than under variable costing.
C)Inventory values are lower and cost of goods sold are higher than under variable costing.
D)Inventory values are higher and cost of goods sold are lower than under variable costing.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead is included in inventory costs. When production exceeds sales, more fixed costs are deferred in inventory, leading to higher inventory values and lower cost of goods sold compared to variable costing.

Under Absorption Costing When Production Exceeds Sales in a Year